Tag Archives: Credit score

You don’t learn about how to buy a house in school. They don’t teach you what you need to apply for a mortgage, what kind of loan you’ll need, or what PMI is (it’s called private mortgage insurance)

And let’s not mention that you need to shop around for the best deal — or you can hire somebody to do that for you.

So here are some First Home Buyer Tips to help guide you through the home buying experience.

BEFORE YOU START LOOKING♦ Have a conversation with your significant other about what you’re looking for, what you need and what you can do without. Standing in the living room during an open house with your real estate agent isn’t the time to argue about wanting three bedrooms instead of four.
♦ Know your financial records. What’s your credit score? How much outstanding debt do you have? What monthly payment can you afford?
How much money did you make last year? You’re going to need to know all of this information. Have all of your paperwork ready to go.
♦ Know your limit — if you can’t afford a $450,000 house, don’t go look at $450,000 houses.
♦ Shop around. There are dozens of real estate agents, attorneys, and mortgage officers so don’t settle. These people are going to work for you, their job is to make you happy. You’re going to be on the phone and meeting with them frequently, so make sure you like who you’re working with.
♦ Do your research. When you do decide on a real estate agent, he or she is going to want to know what your price range is, what neighborhoods you’re interested in, if you want to be close to schools, expressways, public transportation, etc. Know what you want and Get Pre-Approved!

WHILE YOU’RE LOOKING♦ This is the big one you’ll be glad someone told you about.
Don’t get too attached to a house, because if it the deal doesn’t work out, for whatever reason, you’re going to be devastated.
♦ Be willing to negotiate, it’s a big part of the game.
♦ This goes hand-in-hand with negotiating: put your foot down and don’t let anyone take advantage of you. If the seller is asking for way more than you’re told the house is worth, or if they’re not willing to fix something that is broken or at least negotiate the cost, you have to be ready to walk away. There will be more houses, trust me.
♦ Don’t just purchase a house by its listing. Go look at EVERYTHING. A lot of houses look different in person than they do on-line, good and bad.

I have the belief that anyone that deserves to own a home should be able to do so. The American Dream is still attainable for those buyers who do their homework, establish a game plan and work hard to achieve that goal.I’m here to help.

A good credit score is critical when it comes to obtaining the best interest rates and terms on a mortgage. Here are some Credit Dos and Don’ts when looking for a mortgage.

♦ Do Stay Current on All Existing Accounts. One 30 day notice can hurt you.

­♦Do Continue to Use Your Existing Credit As Normal. If it appears your are changing your pattern, it will raise a red flag and your score could go down.

♦Don’t Apply for New Credit. Every time you have your credit report pulled by a potential creditor or lender, you can lose ponts on your credit score. This includes co-signing for a loan.

♦Don’t Pay-Off Old Collection Accounts or Charge-Offs. Talk to your loan officer first. Yes, you are liable for these debts, but now might not be the time. If you must pay-off these old debts, do it through the closing process of your mortgage. Be sure to request a “letter of deletion” from the creditor.

♦Don’t Close Credit Card Accounts. When you close an inactive credit card account, it may appear that your debt ratio has gone up. Closing a card will affect other factors in the score, including credit history.

♦Don’t Max Out or Over Charge Credit Card Accounts. Don’t make any large purchases. Keep your credit card balances at 30% of your credit limit before and during the application process. If you do pay down balances, do it equally across the board.

♦Don’t Consolidate Your Debt. When you combine all your balances into one or two credit cards, it will appear that you have “maxed out” on that card and you will be penalized.

At some point during the mortgage application process, the borrower must exercise their agreement with the lender to lock in the rate for their final mortgage.

What is a Mortgage Rate Lock?A Mortgage Rate Lock protects the borrower from the risk that interest rates will increase during the rate lock period. It guarantees that the lender will offer the borrower a specific combination of interest rate, points or interest rate credit at the closing of their loan.
If market rates rise after the rate is locked, the borrower will still get the lower rate, to the lender’s detriment. But there’s a downside: If rates fall after the rate is locked, the borrower might not be able to take advantage of that opportunity.

When Can a Mortgage Rate be Locked?Buyers typically must wait until a seller has accepted their purchase offer for a specific property before they can lock in an interest rate for their mortgage. In addition, the lender must have certain information about the borrower and the details about the transaction before a rate can be locked. This includes receipt of all signed legal disclosures, the borrower’s credit score, anticipated loan-to-value ratio, property type and the borrower’s signed intent to proceed with the transaction. Until all pieces of the puzzle are in place, the lender can not accurately commit to any final interest rate, cost and terms.

How Long Can a Mortgage Rate be Floated?When a mortgage rate is locked depends on the borrower’s tolerance for risk. The purchase and sales contract dictates when the loan must close. The borrower may opt to let the final mortgage rate ride or “float” with the market until they feel they can get the best deal. Of course they run the risk that the market will turn in their time period and rates will rise from current conditions.
A good mortgage loan officer may have, in good faith, projected a final mortgage rate for processing purposes, but the mortgage application cannot be approved until the final rate has been locked in.
In today’s mortgage processing environment, a mortgage rate could be floated until about 14 days prior to the prescribed closing date. This should give the lender to deliver the final disclosures, the underwriter time for a final review of the application and to issue a “clear to close,” and time for the closing deportment time to deliver closing package to the closing agent.

Should You Choose a Longer Rate Lock Period?Borrowers are well advised to choose a 45 to 60 day rate lock period to ensure they can get the agreed upon rate even if there is a delay in processing their mortgage application. If a loan fails to close within the rate lock period, the borrower will charged the higher of the original lock and the current interest rate. If rates are higher, the borrower may be offered the opportunity to extend the original rate at a cost of 0.25 points for each 7 day period. (A point equals 1.00% of the base loan amount)

How Much Does a Rate Lock cost?Most lenders will not charge for a Mortgage Rate Lock. . But a rate lock isn’t free. Rather, a longer rate lock typically involves a higher interest rate, which is more expensive for the borrower. The interest rate or “pricing” difference between a 15-day rate lock and 60-day rate lock might be as little as one-eighth or could be as much as half of a percentage point. The longer period protects the lender from potential market deterioration. The shorter the rate lock period, the more risk the borrower is taking on, but they should be getting a better price.”

No Mortgage Loan officer is an interest guru. But he does understand the lender’s commitment to you and will do his best to honor the rate lock obligation. However, the complexity of your application and issues like: failure to provide additional documentation in a timely manner, appraisal concerns, possible title problems all add time to the process.

There is rarely a reason not to lock a loan as soon as you can. Interest rates change daily, sometimes hourly. To protect yourself against the volatility of the marketplace, it’s a good idea to lock your rate once you are satisfied with the rate. The reason some buyers dislike loan locks is because they want to grind every dime out of a transaction that is humanely possible. Just remember that if the rate was acceptable when it was locked three weeks ago, a drop of an 1/8 of a point or so isn’t the end of the world. You don’t need to be that kind of borrower to get a good deal.

The Mortgage Underwriter is one of the most important people in the MortgageApplication process. Without the approval of an underwriter, no lender will fund or close on a loan. It is the job of the underwriter to ensure a borrower can repay the loan they are applying for and to determine that the sales price is supported by the appraisal value before granting lending approval.

Approval of a Mortgage Application is based on several things: income, credit history, debt ratios, and savings.
♦ A borrower must be able to prove a stable income and job history needed to repay the loan.
♦ They also must have a credit history that reflects a stable record of repaying obligations and a balanced debt to income ratio. Additionally, a borrower’s monthly debt must fall within acceptable limits determined by the loan product’s guidelines.
♦ Lastly the borrower must show that they have enough money saved for their down payment and closing costs. It is also smart to have a few months of mortgage payments saved away in case of an emergency.

It is the Mortgage Underwriter’s job to make sure all of these factors meet particular loan guidelines. The underwriter will evaluate all of this information and sometimes ask for more information or explanations from a borrower to clarify and support their decision on the Mortgage Application.

Mortgage Underwriters also review the Appraisal to make sure it is accurate and thorough, and that the home is truly worth at least the purchase price. A property’s appraised value is also reviewed by the underwriter to ensure the value supports the amount of the loan you are requesting. A good underwriter will also take into consideration the condition of the property, the location of the property and how it may be affected by natural disasters, such as floods.

An Mortgage Underwriter does his or her best to evaluate the potential risk involved when lending to a borrower. In January 2014, the Consumer Financial Protection Bureau enacted stricter requirements on some mortgages, which included tougher background checks into your bank account, spending and employment history. If an underwriter does not follow all guidelines and makes a poor lending decision and the loan defaults, meaning a borrower stops making payments on their mortgage, it could result in a hefty cost to the lender.

The Mortgage Underwriter has final approval and final responsibility for the Mortgage Loan. They must make important decisions based on the facts presented in the file, their own judgments and similar application experiences. The Mortgage Underwriter has to take a calculated risk and do his/her best to determine if a file adheres to not just the letter but the intent of the loan program guidelines. It is not an easy job.

What is the benefit of having Mortgage Pre-Approval when looking for your First Home?

There is a difference between Mortgage Pre-Qualification and Mortgage Pre-Approval.
♦ Mortgage Pre-qualification is based solely on the you verbally share with your Mortgage Officer to qualify for a mortgage loan. The Mortgage Pre-Qualification Letter basically says that the lender will give your a mortgage when they see that the information you told us about is correct and meets certain qualifying standards.
♦ With a Mortgage Pre-Approval, the buyer supplies all the written documentation of the information they claim to be true. This formal application is reviewed by and underwriter to be sure the credit, income and assets are sufficient to obtain the loan you are applying for. Loan Officers can not issue a Mortgage Pre-Approval. Only a Mortgage Underwriter can issue a valid Mortgage Pre-Approval Letter.

If you are looking to buy your First Home is 2015, a Mortgage Pre-Approval is the smartest to get into your dream home. Here’s Why …

1.Knowledge is Key: A Mortgage Pre-Approval gives you a firm idea as to how big a house you can buy and how much of a mortgage you can afford. Lenders base this amount using a formula (your Debt-to-income ratio) that compares your income to your total outstanding debts, including your proposed new housing expenses. This will keep you focused on the big picture and help to prevent being disappointed if you fall in love with a home that is too expensive for your means.

2.Improve Your Negotiating Position: When a seller is comparing two offers and one of the buyers has Mortgage Pre-Approval, they have a high confidence level that their sale will go through and close sooner. This may help you to win in a competitive bidding situation.

3. Confidence in Your Offer: Knowing the the paperwork supporting the key information needed to obtain a mortgage has been reviewed by and underwriter will give you, and the seller, confidence that your offer is bona fide.

4. Keep Your Spending on Track: Having detailed information on your interest rate, down payment requirement, closing costs estimate and mortgage terms will help you stay with in your budget and be prepared for the closing of your loan.

5. Time is Valuable: Knowing what you and cannot afford can save you time and frustration in the house hunting process. This will also help your Realtor find the perfect house in your price range.

6. Move in Quicker: Having Mortgage Pre-Approval will save you time when your application is submitted for final approval. Most of the paperwork has been done, so all you should need to do is have the property inspected and appraised. The faster you can close, the quicker you can move into your dream home.

The Mortgage Pre-Approval process is not quick and not necessarily easy. But most REALTORS® will tell you that getting Mortgage Pre-Approval is the key to getting the new home you want.

The Millennial Generation grew up during the housing crash, so rightfully they are more cautious of becoming homeowners because of the foreclosure problems they’ve read about or their parents may have experienced.
Now, facing high student loan debt and a tough job market, studies show that Millennials are less likely than other generations to experience homeownership. And during the last few years, the real estate market has been especially scary for would-be homeowners. What’s a Millennial to do?

Here are a few First Home Buyer Tips for the Millennial Generation to help you pursue your dream of home ownership someday:

Get Pre-QualifiedLearn as much as you can from a local Mortgage Broker you trust “to really understand the mortgage process; what types of mortgage programs are available: and what types of payments and upfront costs are associated with specific property types,” says Malcolm Hollensteiner, Director of Retail Lending Products & Services at TDBank.
By connecting with a lending professional beforehand, Millennials will be able to find out what it takes to qualify for a loan and maybe even get Pre-Qualifiedfor one.Part of the learning process also includes becoming knowledgeable about the real estate market you’d like to buy a house in. A Real Estate Agent who knows about the local markets will help you determine where you want to live, give you an idea of what properties are available in your price range, and allow you to develop a solid game plan.Map Out Your Future.Are you financially prepared to take on the debt of a mortgage? Do you have enough money saved up for a rainy day fund? Have you accounted for the maintenance costs of owning a home? How much of your hard earned savings are you willing to contribute toward the Down Payment on a First Home and the Closing Costs associated with the purchase? These are all very real questions that Millennials should ask themselves when dreaming about buying their First Home.
Plus, homes nowadays may not appreciative in value the same way they did during the boom years. So consider renting as an alternative if you can’t afford the costs of owning a home or are unsure of your plans five years from now.Review Your Credit and Finances.With many Millennials mired inhigh student loan debt, it’s important to take a good look at your credit and any outstanding debt you might have before you even begin thinking about buying your First Home. To determine whether you qualify for a loan, lenders will take a look at your debt-to-income (DTI) ratio. Any student loan payments, expensive car payments or credit card debt you have will affect the ratio. Try to pay down as much student debt as you can, consolidating your student loans, to improve your debt-to-income ratio.Also, resolve any credit issues before beginning the process of buying a house. You want to put yourself in the best position possible. So if you don’t have enough credit history, for instance, find out what you need to do in order to build credit.Use Technology to Your Advantage.More than previous generations, Millennials have at their disposal a number of online tools that can help ease and speed up the home-searching and home buying process. From online calculators that help you determine how much you need to save in order to buy a home to real estate listing websites, the Internet can be your best friend as you navigate the real estate waters.
Even something like Google Street View can show you what a neighborhood is like and, of course, there are sites that review potential real estate agents you’re thinking of hiring. Many of these tools are available as apps as well, so take advantage of them.Think Low-End.New federal law says the maximum allowable DTI on a mortgage is 43% of a borrower’s gross monthly income. That includes the mortgage payment, monthly escrow for taxes and Homeowners Insurance, monthly Mortgage Insurance plus any other debt payments. “Just because you might be qualified up to a certain loan amount doesn’t mean you have to buy that much property,” says Hollensteiner.
Hollensteiner also says that Millennials are particularly good at looking at properties that are within their budget. “The millennial generation grew up during the housing crash, so rightfully they’re more trepidatious of becoming homeowners because of the foreclosure problems,” he says. “Understand that homeownership is as much an investment in the community as an investment in your own financial portfolio.”

Owning your own home has been the American Dream for decades. It’s a dream that has been sorely tested by the real estate crisis and economic developments in recent years. I have the belief that anyone that deserves to own a home should be able to do so. The Dream is still attainable for those Millenials who do their homework, establish a game plan and work hard to achieve that goal.

Beware of Imposters!

There is Only One Website authorized by law to provide the Free Annual Credit Report you are entitled to under the Free Credit Reporting Act –annualcreditreport.com.

Other websites that claim to offer “free credit reports,” “free credit scores,” or “free credit monitoring” are not part of the legally mandated Free Annual Credit Report program.

The Fair Credit Reporting Act (FCRA) requires each of the nationwide credit reporting companies — Equifax, Experian, and TransUnion — to provide you with a free copy of your credit report, at your request, once every 12 months. The FCRA promotes the accuracy and privacy of information in the files of the nation’s credit reporting companies.

The Federal Trade Commission (FTC), the nation’s consumer protection agency, enforces the FCRA with respect to the information contained in your credit report.

Q: How do I order my Free Annual Credit Report?
Do not contact the three nationwide credit reporting companies individually. The three nationwide credit reporting companies have set up a central website, a toll-free telephone number, and a mailing address through which you can order your free annual report.
To order:
1. Visit annualcreditreport.com,
2. Call 1-877-322-8228.
3. Mail the Annual Credit Report Request Form to:
Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281.

An applicant’s credit score is a major factor in obtaining the Right Mortgage at the Right Rate. It would seem prudent for any First HomeBuyer to obtain a Free Annual Credit Report as part of their planning process.